Stake sell by Baring India takes wind out of Manappuram Fin

The share price of gold financier Manappuram Finance slumped 6% Tuesday after nearly 5 percent of the total equity of gold finance company changed hands via block deals.
Around 43.05 million shares of Manappuram Finance have changed hands via block deals on the BSE.
A combined 63.8 million shares, representing 7.5% of total equity, of Manappuram Finance changed hands on the BSE and NSE so far.

Media reports suggest that Baring India Private Equity Fund II is offering 42 million shares (5%) of the company in an accelerated book-building with a floor price of Rs 172 per share, a 6.57% discount to the last closing prices.

As on December 31, 2019, Baring Fund has an 8.76% stake or 74 million shares in the company, the shareholding pattern data shows.

In the past six months, the stock of Manappuram Finance has outperformed the market by surging 63%, against a 7.4% rise in the S&P BSE Sensex till Monday. It hit an all-time high of Rs 195 on January 29, 2020.

Interestingly, the gold financier had recently received an upward revision in share price target reported robust financial earnings for the three months ended December amid strong growth in gold loan assets under management (AUM).

Manappuram Finance has reported a 63% growth in consolidated net profit for December quarter, 2019, at Rs 397.84 crore against Rs 244.09 crore reported for the corresponding period of the previous year.

On a standalone basis, its net income stood at Rs 332.42 crore, up 57.7% from the year-ago period.

The Kerala-based company’s total consolidated revenue from operations rose over 29% to Rs 1,399.02 crore, taking its assets under management (AUM) to Rs 24,099.95 crore, up 35.52%.

Gold loan AUM, its mainstay, increased 29.69% to Rs 16,242.95 crore and the business added 3.25 lakh new customers and disbursed loans of Rs 40,304.26 crore in aggregate with live gold loan customers being at 26.4 lakh.

While overall GNPAs stood steady at 0.5%, microfinance business witnessed 55bpsYoY & 48bps QoQ jump in NPAs largely on account of delinquencies in parts of Karnataka.
In-vehicle finance, 86-87% exposure is to used vehicles and 13% is to new vehicles.

35% exposure is from the south, 27% from north and west each and 11% from east. NIMs have improved by 40bps sequentially to 16.8% due to a decline in the cost of funds.

However, management is facing no issues on the liquidity front with an undrawn bank in its kitty. The company raised US Dollar Medium Term Note of $300 Mn

Pick-up in gold-loan in the coming quarters, higher gold prices and favorable regulatory environment will act as a positive catalyst.

The non-gold segment will continue to deliver a robust growth with MFI and vehicle finance being on the forefront.

We believe that the company has the potential to deliver 20%+ ROE driven by ROA of 4%+ going ahead.

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